Mechel Swings to Profit, Sees Fall Turnaround

NEW YORK ( TheStreet)- Mechel ( MTL), a leading Russian mining and steel group, reported first-quarter revenue rose 61.1% from a year earlier to $1.9 billion.

Net income for the quarter was $83 million, as opposed to a loss of $690 million a year ago. Meanwhile, operating margins jumped 7.8% from 1.2% a year earlier.

Andrei Deineko, CEO of Mechel-Steel Management Co., commented on the results: "Recovery in consumption and price increase in the first quarter of 2010 due to the preparations for the new construction season had a positive effect on steel segment performance and allowed us to substantially increase the operating profit. Favorable conditions in the foreign markets persisted -- South-East Asia and Middle East witnessed continuous demand growth. Despite certain temporary chill-out on the Russian and international markets which we notice at the moment, that is quite natural after relatively strong growth of last several months, we believe that market conditions will improve in the beginning of autumn 2010."

AK Steel stock was boosted by Goldman Sachs' rating upgrade to buy from neutral. Declining iron-ore prices in the spot market will benefit non-vertically integrated companies like AK steel in the upcoming quarters.

At $19.88, Mechel, a stock to watch for 2010 is trading at an attractive price-to-earnings ratio of 9.6, in comparison to U.S. Steel's 21.5, AK Steel's 17.6 and Nucor's 29.3.

Karvy Global Services (www.karvyglobal.com), a subsidiary of the Karvy group (www.karvy.com), provides specialized research in asset classes including stocks, mutual funds and insurance to leading Wall Street firms.